According to a recent report by Newmark, the commercial real estate industry is facing an estimated $332 billion in potentially troubled debt that is set to mature this year. This accounts for approximately one-quarter of the total $1.3 trillion in potentially troubled debt that will come due between now and 2033.
The majority of these maturing loans are tied to office properties, with a staggering amount of $184 billion. However, the apartment sector also has a significant share at nearly $106 billion.
In the coming years, there will be a shift towards multifamily loans contributing more towards potentially troubled maturities compared to office properties. From 2028 through 2033, apartments will account for a larger share than offices although their dollar volumes may be smaller compared to this year’s numbers.
When comparing different sectors against each other based on potential trouble with maturing loans, retail falls behind as third while industrial ranks even lower at fourth place. According to Newmark’s latest United States Multifamily Capital Markets Report , most office loans are currently underwater which explains their high volume in terms of potential trouble. On the other hand, multifamily has more favorable loan-to-value ratios overall but its larger market size and concentration during past liquidity bubbles still result in considerable nominal exposure.
Overall it can be concluded that there is an impending risk within commercial real estate due to upcoming maturing apartment and office loans which could lead them overtaking each other as top contributors towards potentially troubled debt.
